Bernstein Sees a Tactical Window in Indian Nifty Stocks as Trade Deal Changes the Mood

Contents

Trade Treaty Arrival Creates Conditions for a Sentiment-Led Bounce Tariff Reset Puts India on Par With ASEAN, Improves Relative Positioning Concessions and Commitments Add Complexity to the Outlook Here’s What Happened Today and Why Traders Reacted Valuations Still Expensive, Limiting a Sustained Rally Sector Picks Show Where Smart Money May Rotate What This Means for Investors and Portfolios Tactical Rally in Sight, but Durability Still in Question

A sharp shift in global brokerage sentiment is turning heads on Dalal Street. Bernstein has flipped tactically bullish on Indian equities after the India-US trade treaty slashed effective US tariffs on Indian goods to 18% from 50%, calling for a short-term rebound in the Nifty 50 towards 26,500.

However, the brokerage stopped short of a structural upgrade. It kept its year-end Nifty target unchanged at 28,100 and retained a Neutral stance for the full year, cautioning that the rally could be short-lived and sentiment-driven rather than rooted in earnings.

For traders and investors, the message is clear: there may be a tradable bounce, but not yet a durable bull run.

Trade Treaty Arrival Creates Conditions for a Sentiment-Led Bounce

In its February 3 research note, Bernstein said the long-anticipated India-US trade treaty has arrived at a time when Indian equities have already corrected sharply this year.

“We were anticipating the US-India trade treaty to get signed and believed it would trigger a short-term rebound for Indian equities. We are now at that moment,” the brokerage said.

According to Bernstein, the setup favours a sentiment rebound because:

Markets are already corrected year-to-date
Positioning has turned lighter
Trade uncertainty has reduced

But it emphasized that the immediate upside may not last long if earnings do not catch up.

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Tariff Reset Puts India on Par With ASEAN, Improves Relative Positioning

Under the trade deal, India’s effective tariff rate is expected to drop to 18% with the removal of the 25% punitive duty. Some sectors like autos and metals may still face tariffs in the 20–25% range.

Bernstein noted that this reset:

Puts India broadly on par with ASEAN peers
Improves India’s standing versus China
Reduces a key overhang for exporters

The brokerage also believes the pace of the agreement was influenced by the India-EU trade treaty, which may have pushed the US to revisit its tariff stance toward India.

Concessions and Commitments Add Complexity to the Outlook

On the other side of the deal, Bernstein flagged that India is expected to reduce tariff and non-tariff barriers on US goods to zero and commit to $500 billion in purchases across agriculture, technology, and energy over multiple years.

Yet the brokerage warned that the fine print is still awaited.

This matters because:

Sectoral impacts may be uneven
Some domestic industries could face pressure
Implementation timelines remain unclear

For investors, that uncertainty limits the scope for aggressive re-rating.

Here’s What Happened Today and Why Traders Reacted

Today’s market reaction was shaped by a mix of relief and recalibration.

Traders responded to:

Confirmation of tariff cuts to 18%
Reduced geopolitical and trade uncertainty
Bernstein’s tactical bullish call
Hopes of currency stability and rate cuts

“With markets weakened by soft earnings and a lacklustre budget, improving sentiment — not earnings — should drive the move,” Bernstein said.

In short, traders chased the idea of a bounce rather than a fundamental turnaround. Momentum-oriented players typically move quickly when global brokerages signal a tactical shift.

Valuations Still Expensive, Limiting a Sustained Rally

Despite the correction this year, Bernstein said Indian valuations remain expensive. This makes the rebound more psychological than fundamental.

The brokerage highlighted key constraints:

Limited scope for earnings upgrades
Heavy fund-raising pipelines
Valuation premiums versus peers

It also noted that India’s USD returns are among the lowest globally in 2026 so far, partly due to earlier market weakness and rupee depreciation.

While the trade deal may stabilize the currency and open room for over 50 basis points of rate cuts, Bernstein does not see this alone sustaining a long rally.

Sector Picks Show Where Smart Money May Rotate

Bernstein continues to prefer:

Financials
IT
Telecom

IT stands out as a potential beneficiary of better US-India relations, even though services are not directly covered in the trade pact. Reduced regulatory scrutiny and lower risk of punitive actions could help sentiment.

Manufacturing and trade-linked stocks may also recover, while autos and defence remain watch areas until sector-specific details emerge.

What This Means for Investors and Portfolios

For investors, Bernstein’s call suggests opportunity with caution.

Possible positives

Short-term trading opportunities
Sentiment boost from trade clarity
Potential foreign flow revival

Key risks

Expensive valuations
Weak earnings momentum
Rally may fade in weeks

For diversified portfolios, this could mean selectively increasing exposure rather than making aggressive bets.

Tactical Rally in Sight, but Durability Still in Question

Bernstein’s outlook frames the current moment as a tactical window rather than a structural shift. The brokerage is effectively saying that the mood can lift prices in the near term, but fundamentals must eventually validate them.

For traders, the 26,500 Nifty level is now a near-term marker. For long-term investors, the bigger question remains whether earnings and growth can justify India’s premium valuations.

Until then, this rally may be driven more by hope and positioning than by hard numbers — a setup that can be profitable, but rarely permanent.